Government Shutdown: No CFTC, but SEC stays open

If you’ve been living under a rock the past week, you might not know that the federal government is in day one of shutdown. If you’re on social media – you sure as heck know it’s happening what with the twitter/facebook/social media world exploding. Except of course the government tweeters (all social media accounts controlled by the government have stopped tweeting… talk about non-essential).

Here’s what it came down to: the GOP controlled House is still attempting to delay/defund/repeal The Affordable Care Act, better known as Obamacare 4 years after it was passed, and Democrats controlling the Senate refuse to repeal the law. Jon Stewart on the Daily Show had a good breakdown of it last night:

While the media is abuzz on how this will affect your personal life, we’re left wondering how it’s going to play out in the futures markets?

From a regulatory standpoint, the CFTC is shut down (although an email was sent out to NFA members giving the cell phone numbers of four CFTC staff in case of emergency), meaning we’re not likely to see any FCM fines for a few days, while the NFA (a self regulatory organization) remains open for business. The SEC remains open also, with a spokesperson with the SEC saying they have enough left over funds to stay open during the shutdown.

Reaching past regulations of our industry, the New York Times has put together a list of federal employees who are allowed to work during the shutdown (fish hatchery employees being one group).

Interestingly enough, the biggest impact the shutdown could have on the markets is on livestock and dairy futures. The Wall Street Journal reports the CME may have to change or modify its settlement procedures because no one’s working over at the USDA…

“The October 2013 contracts for live cattle, lean hog, feeder cattle futures and options, as well as milk, butter, whey, cheese and nonfat dry milk futures and options for September 2013 could potentially be impacted by the lack of pricing information from the U.S. Department of Agriculture. The USDA is furloughing staff who produce numerous daily and weekly reports on cash prices for agricultural products as a result of the partial government shutdown that began Tuesday.

CME said some of its dairy and livestock futures contracts are cash settled at their expiration, based on USDA price data. A prolonged government shutdown, it said in a letter Tuesday to customers, “may require the exchange to modify the current settlement procedures” for the affected contracts.”

So there’s not need to panic just yet, but the possibility is there…

Luckily for the Ag commodities, the crop report was released yesterday, so there shouldn’t be much of a hiccup (unless this shutdown lasts longer than expected). However, investors relying on economic reports for their index futures aren’t so lucky. The new jobs report is supposed to be released this Friday, but the Associated Press reports the U.S. Labor Department has no plans to release the data during the shutdown.

As for immediate market reaction – it’s predictably unpredictable, as always, with stock indices up rather handily (+1% on average). Metals seem to be taking the brunt of the pain today, (Gold down -2.7%, Silver -4.24%, Copper -1.69% – past performance in not necessarily indicative of future results), leading Josh Brown to quip:

And all this may just be a prelude to the coming Debt Ceiling debate in just a couple weeks. The worst case scenario would be the federal government still shutdown, yet somehow needing to figure out the debt ceiling at the same time! Now, normally we would be cheering on the volatility – but the sort of whipsaw, hour by hour volatility that seems to come with these sorts of debates/votes usually isn’t kind to managed futures. What would be much better would be if this is the tip of the iceberg – creating longer term directional volatility (like a large 6 month move in bond prices, 3-4 month rally in the USD, etc.)

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.

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Each year, Attain Capital delivers its Semi-Annual CTA Rankings, evaluating programs across eleven different metrics related to return, risk, correlation levels, ease of access (minimum account size) and length of track record over a variety of timeframes.

DISCLAIMER

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.

The entries on this blog are intended to further subscribers understanding, education, and - at times - enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The performance data for various Commodity Trading Advisor ("CTA") and Commodity Pools are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.

The owner of this blog, Attain Capital Management, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.

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Disclaimer

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.